Small sellers to up e-commerce ad spend by 75% to cash in on festival season

The upcoming festive season is expected to see a minimum of 140 million shoppers doing transactions online

Small sellers on ecommerce platforms such as Flipkart, Amazon and Meesho are looking to spend 75 percent more than they did in the year on online advertising to drive sales in the festival season, management consulting firm Redseer said in a report on September 29.

The festival period would likely enable sellers, especially the smaller ones, to come out of the challenging sales environment and they were optimistic of strong growth, Mrigank Gutgutia, Partner at Redseer, said.

“Accordingly, they are willing to significantly ramp up their advertising spending on the ecommerce platforms during this festive period," Gutgutia said.

The festival season typically runs from late September or mid October to December when consumer spending sees a spike. From clothes to big-ticket purchases like vehicles and homes, this is the period businesses look to cash in on.

Festival cheer

Overall, across different-sized sellers, the report anticipates a 15 percent spending growth in online ads from the previous year’s festival season and a 50 percent growth versus business-as-usual periods of this year.

Flipkart and Amazon, the biggest e-commerce platforms in the country, have announced their flagship season sales in the second week of October, which will build up to Diwali in the second week of November.

Online retailers expect festive season sales to rise up to 20 percent from the year-ago period to over Rs 90,000 crore as consumer spending normalises and margins improve due to rising ticket sizes of purchases.

The first online festive season sales were held in the country in 2014. Over these 10 years, the ecommerce market has grown almost 20 times — from a gross merchandise value (GMV) of Rs 27,000 crore in the all of 2014 to an expected level of Rs 5,25,000 crore in 2023.

The number of annual transacting users has jumped 15 times to hit 230 million this year. The festival season is expected to see a minimum of 140 million shoppers doing transactions online.

This year could see increased contributions from higher margin categories like beauty & personal care (BPC), home & general merchandise, fashion, etc, the report said.

Premiumisation is expected to lift Average Selling Prices (ASP) and increasing ads and promotion revenues will possibly make this year’s season the most efficient from a margin perspective.

“Over the last several quarters, we are seeing enhanced GMV contributions from categories beyond electronics. While electronics sell a lot in the festive period, looking at the bigger picture and comparing the festive sale periods over the last several years, there is a clear trend of category diversification,” Gutgutia said.

Redseer also expects multiple other sub-themes to play out. For example, D2C brands are likely to be more prominent.

Smartphone sales, however, are expected to remain flat or grow in single digits compared to the previous year, despite affordable 5G models being launched and a push from pre-Cricket World Cup purchases by users, according to industry analysts.

Online marketplaces, which are losing market share due to a revival of brick-and-mortar retailers, are likely to hurt more.